Renters insurance when you sublet your space

For some, subletting may be the answer to a tight apartment rental market.

Your renters insurance may not cover theft when you sublet your apartment.

Renters insurance is recommended for subtenants, to cover their belongings.

Anyone who has tried to rent an apartment during the past year knows that finding a vacant one, much less something with reasonable rent, can be a painful process. According to Reis Inc., a commercial real estate research firm, U.S. apartment vacancies dropped to an average 4.7 percent and rent prices rose 1.3 percent during the second quarter of 2012.

The tight rental market means some renters are opting to hold on to their lease and sublet their apartments when they need to travel, work in another location for a few months or leave for an entire year. Notifying the landlord and having a signed sublet agreement should be the first priority if you intend to bring in your own tenant. The next priority should be evaluating your renters insurance coverage.

"If you intend to leave some of your belongings in your apartment, such as furniture or electronics, you need to contact your insurance agent to let them know that your residency is changing," says Jeanne Salvatore, a senior vice president with the Insurance Information Institute in New York.

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"You need to find out whether or not your coverage stays the same," she adds. Much depends on the company, the regulations in your state, and the length of the sublet and how often you intend to sublet your apartment.

Just a one-time sublet will be viewed in a different way by your insurance company than if you're a serial sublessor.

"If you regularly sublet your apartment, you may need an insurance policy that is more like a landlord's insurance policy to protect your belongings," says Ron Moore, a senior product manager with MetLife Auto and Home. "There's no set definition of 'regularly,' but if you are subletting your place often and using it like a business, then your renters insurance won't cover your belongings."

What your renters insurance covers

When you sublet your apartment, keep in mind that your regular renters insurance has two components: coverage for your personal possessions and liability coverage, notes Ken Kitzmiller, vice president of underwriting for Mercury Insurance in Brea, Calif.

"While you want to have coverage in case the items you left in the apartment are stolen or damaged, it's almost more important to have liability coverage in place in case something happens to someone in the apartment, and they could say that it was your fault," says Kitzmiller.

"For instance, if a stair was loose and you had prior knowledge of the hazard but didn't tell the subletter, then you could be responsible for the medical bills of someone who was hurt," he adds.

Moore says while renters insurance might offer you some liability coverage plus protection against damage or loss due to fire, it may not cover a theft while a subtenant is living in the residence because it would be easy for that person to steal.

"You need to check with your insurance company," Moore says, "But if you find out you won't be covered for theft, then you may want to put more of your belongings in storage."

What the landlord's insurance covers

Your landlord -- the property's owner -- has an insurance policy, too. Kitzmiller says it covers the building itself, but not the personal property or any liability issues in individual units.

"The landlord's insurance doesn't protect either the renter or the subletter unless there was a fire in the building that was the landlord's fault," says Moore. "In a theft, the landlord is rarely held responsible, unless maybe if every single light bulb was burned out or something like that."

What if you're the subtenant?

MetLife's Moore says people who stay in homes on a sublet basis should purchase renters insurance to cover their own possessions and to provide liability coverage for themselves. He says a subtenant can buy coverage even without a signed lease. A change of address card or a receipt for the deposit would be the only requirement to prove, for insurance purposes, that a sublessee is living in the apartment.

Sometimes, a subtenant has another, permanent home but enters into a sublet arrangement during a temporary out-of-town work assignment, an extended vacation or an educational stint. In those cases, a homeowners or renters policy at the permanent residence may cover a computer and other personal possessions at the sublet.

But the Insurance Information Institute's Salvatore says there might be a limit, such as just 10 percent property coverage on belongings when they're away from the person's main home. That means subtenants with $20,000 in renters insurance where they normally live would be covered up to only $2,000 at a sublet apartment.

"A renter would be smart to insist that the subletter provide proof of their own renters insurance to cover their belongings and for liability coverage for the subletter before agreeing to the sublet," says Kitzmiller, of Mercury Insurance. "The subletter can purchase an annual renters insurance policy and then cancel it when they move."

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